Gaming tax relief falls short of expectations for struggling homeowners

Sunday

Sep 30, 2012 at 12:01 AM

The next time you pass a casino, say thank you. It just helped you pay for the equivalent of a couple of tires. Pennsylvania's gaming industry, swept in on the coattails of property tax relief, is doing just that — reducing your school taxes.

HOWARD FRANK

The next time you pass a casino, say thank you. It just helped you pay for the equivalent of a couple of tires.

Pennsylvania's gaming industry, swept in on the coattails of property tax relief, is doing just that — reducing your school taxes.

Just not by that much.

As you pay your school taxes today, you will have saved from $337 to $447 on your bill, thanks to state taxes on slot machine revenues.

The median tax bill in Stroudsburg Area School District — with no tax increases this year — was $4,187, according to Stroudsburg Area School District Business Manager Don Jennings.

That means gambling gave Stroudsburg district taxpayers an 8 percent savings.

The legislation that determined the distribution of gaming funds was called The Taxpayer Relief Act of 2006.

Some call it false advertising.

"I told them, 'You are getting hosed,'" said state Rep. Mario Scavello, R-176, when school boards were first introduced to the legislation in 2004. "The most you're going to get is one year of no tax increases."

While former Gov. Ed Rendell predicted somewhere around a billion dollars in property tax relief a year once all of the casinos where open, that number has proven to be overly optimistic.

Less than two-thirds of that has been generated, with 11 of the state's 14 legislated casinos operating.

Yet the industry has been a tax-revenue-generating machine.

"Pennsylvania casinos generate more tax revenue from casino gaming than any other state, including New Jersey and Nevada," said Richard McGarvey, deputy director of communications for the Pennsylvania Gaming Control Board. "A 55 percent tax rate will do that."

That tax rate, which is applied to slots revenues only, is the highest in the nation among states that don't own their own slot machines.

While slots were sold to the state on the basis of property tax reduction, table games were not.

Table games were legalized in 2010, almost overnight in legislative time.

The argument was to close a $200 million budget gap that year. It did just that, thanks to the one-time up-front antes casinos paid as "certificate fees."

All of those funds go into the state's general fund. None goes to property tax relief.

In fact, tax relief is a small drop in the sea of revenues generated by the casinos.

To put it into perspective, the state's casinos generated $31 billion in bets and $2.5 billion in slots revenues in the 2011-12 fiscal year.

Although more than half of slots revenues goes toward state taxes, only 34 percent goes to property tax reduction.

The rest is spread between economic development projects, the casinos' host communities and the horse racing industry, which gets 12 percent of slot revenues.

Much of the economic development money, 5 percent of gaming revenues, has gone to projects in Philadelphia and Pittsburgh, like the expansion of Philadelphia's convention center, and a hockey arena and airport debt in Pittsburgh, according to McGarvey.

That leaves about $850 million for the taxpayer relief fund.

But the fund is diluted further, with payouts to senior rent relief, problem gambling, fire department grants and forest reserves.

After being whittled down, the real property owner fund is closer to last year's $616 million.

The state then divvies up the tax relief funds once a year to school districts with a formula that's more complicated than a celebrity divorce settlement.

The formulas are locked in on historical figures from 2002-05, including the school district's personal income, home market value, millage and taxes.

That prevents funding adjustments based on changes in a community.

By the time casino taxes get to property owners, there isn't much left.

"There has been a misconception that gaming revenue would relieve homeowners of school property taxes, but it was a reduction," McGarvey said.

School districts were initially given an opportunity to opt out of the property relief program if they had philosophical difficulties accepting money from gambling.

Monroe County's four school district's ranked among the top 30 of the state's 499 school districts in estimated tax relief distributions to homeowners last year.

Pleasant Valley School District ranked fourth in the state, with $447 per qualifying property.

East Stroudsburg was 11th with $394; Pocono Mountain was 12th with $338; and Stroudsburg came in 29th with $322 per property owner.

The Chester-Upland School District ranked first at $631 per property. The average homeowner in the state received about $191 last year.

State Rep. Mike Carroll said that although the program has been somewhat helpful, additional measures are needed to satisfy the law's intended outcome.

"It is long past the time to provide substantial and meaningful school property relief for homesteads and farmsteads in this state by enacting legislation which shifts to a sales and income tax model and away from property taxes."

It's a model supported by Scavello and others, but has lacked the political clout to become a reality.